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9:00am  Monday  10 October 2011

The Philippine Stock Exchange Index is back above 4,000 (4,009.26 to be exact) and it came at a time when people were extremely bearish.  Skeptics may term this recovery as a dead cat bounce, and that would be a good topic for discussion.  I would like to highlight, however, that the bounce had come for 2 trading days – one was a 1.76% bounce and the next was a 3.05% bounce.  On both occasions, the market closed at the highs of the day.  On both days as well, we saw net foreign selling; although on Friday, selling was significantly subdued with 69 million in contrast to 940 million the previous day.  Incidentally, the total net selling for last week was over 3 billion which similarly followed a huge level of foreign selling the previous week.

I am not exactly sure that the cat is dead.  I look at a stock like DMC which had been hammered badly by foreign funds selling, but the stock’s fundamentals are impeccable.  Look what happens when the foreign selling dries up – DMC is up 12.4% from its lows.

Tonight, the market in New York is closed so we’ll have to look elsewhere for leads.  The situation in Europe has not changed.  Most people are preparing for a doomsday scenario.  I reckon that most portfolio managers are geared up for it.  Hence, all these net foreign selling.  My only point is that we locals should take advantage of the foreignpanic to feather our portfolios with the good stuff.  To my mind, the mining story remains solidly intact and base metal prices, while lower, are not falling out of bed.  Correspondingly, our favorites LC and ORE are recovering creditably.

At this point, I am probably more constructive on ORE than LC because ORE is well into its production and delivery stage.  In fact some of the less auspicious mining firms such as NI and MARC are on course to larger shipments in the succeeding months.  In fact, NI had recently announced a joint venture with Swiss Commodities giant, Glencore.  A lot of local investors probably do not know who Glencore is.  I will scrounge up some information to share in order to give us perspective on how this will impact the local mining sector.

In the meantime, it should be a period in the Philippine stock market when we can hunt for the real bargains.  DMC was a good example.  Traders and investors alike should be looking at some of the old favorites such as AP, MBT and MPI as they become more compelling in price.

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